Susana Fernández Caro details how some banks have tapped into

the potential for making loans available exclusively through ATMs.

Linking the convenient ATM – a suitable consort at these times of fast living – with better credit scoring has given rise to consumer loans obtainable at cash points. The result: increased choice for customers and higher loan sales along with lower costs for the banks. At present, these are only available in a few countries, but competition will ensure ATM consumer loans become more widespread.

Currently, these ATM loans aim at getting Mexican underbanked clients to use a wider range of services, or at expanding the array of consumer funding solutions for customers in the developed Spanish banking market.

Last year, HSBC Mexico pre-qualified about 400,000 of its 2.5 million clientes nómina – customers who get their salary paid into an HSBC current account – for consumer loans at ATMs. “Our payroll clients use their debit cards to withdraw money at cash points but quite often they fail to use other services. Offering them consumer loans allows us to create a credit history for these clients,” says Roy Caple, executive director of public affairs at HSBC Mexico.

No questions asked

The bank has 6.7 million clients in a country where only 30% of a 106 million population uses banking services. Eligible customers for consumer loans, who need to have been clientes nómina for at least a year, can withdraw up to 3000 pesos ($263) – the maximum daily limit – at HSBC’s 4800 cash points in Mexico, once the loan is approved and credited to the account. With these ATM credits, clients are not asked to detail the purpose of the loan, unlike when they take a loan out at a branch.

Meanwhile, Spanish savings banks La Caixa has just begun to offer clients consumer loans via its network of more than 7000 ATMs in Spain, whereby nearly two million clients can obtain between €1000 and €6000.

Once the client has accepted the conditions of the loan, the money is credited to their account automatically. Customers can make simulations on the screen at the cash point, entering different redemption periods and installment volumes.

La Caixa told The Banker that a specific risk policy had been developed for this product using the behaviour scoring models implemented several years ago at the savings bank, which help determine the default predictability rate. The credit limits are set by taking into account “variables of [the clients] links to La Caixa. The interest rate depends on criteria both of the profitability arising from links with us and the ‘premium risk’, that is, the additional cost for the expected loss of future payments”.

Consumer funding options

In July, 2005, La Caixa launched an internet service for its clients to apply for consumer loans online. By offering this product now at cash points, La Caixa aims to widen its range of consumer funding solutions.

María Cabanyes, European regional credit officer at rating agency Moody’s, explains that “for the past year Spanish banks have been shifting their strategies away from the mortgage market towards loans for small and medium-sized companies and also consumer credit, due to concerns of a potential slowdown in the housing market”.

One of Spain’s two largest banks is reportedly launching pre-approved ATM consumer loans this spring. Its investment in credit-scoring technology will allow it to offer these to over four million clients by the end of the year.

Customers with the approval will not have to visit the branch to sign a loan form. Instead, they will simply press the “accept” button on their screens to sign up for a loan, accessible 24 hours a day, 365 days a year.

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